RBC cracks Wall Street's top 10 list for advising on M&A deals

RBC Sees Clear and Present Pressures on the Market

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Royal Bank of Canada set a goal nine years ago to become a Top 10 investment bank in the U.S. -- but cracking Wall Street’s upper echelons for advising on takeovers had proved elusive. Until now.

RBC Capital Markets has risen to the No. 10 ranking for advising on announced U.S. mergers and acquisitions this year, its highest standing ever, according to data compiled by Bloomberg. The firm has 9.9 per cent market share, with 72 deals valued at about US$179 billion as of Oct. 21. Its U.S. investment banking co-head, Matthew Stopnik, anticipates more gains ahead.

“We’re scratching the surface,” Stopnik said in an interview at the firm’s Lower Manhattan office. “We see an opportunity to continue to chip away and do higher quality, more meaningful transactions and build market share.”

RBC Capital Markets in 2010 targeted a Top 10 U.S. ranking within three years. It expanded New York operations by hiring star bankers, and boosted lending to win bigger clients. While the efforts paid off years ago in equity financings and debt deals, the Top 10 for M&A remained out of reach.

The firm has the biggest U.S. investment-banking operations of its Canadian peers including Toronto-Dominion Bank, after taking advantage of the financial crisis a decade ago to expand and recruit talent while other firms scaled back. Bank of Montreal is now aiming to take advantage of the more-recent retreat by European firms to expand its U.S. investment bank.

RBC Capital Markets today has about 560 investment bankers in the U.S. -- more than double from a decade earlier, and almost three times more than in Canada. That’s helped the firm move up the league tables.

“We feel like we’re gaining greater traction working on larger deals,” said Stopnik, 47. “A lot of it has to do with the hires and investments we’ve made over the years.”

RBC advised Raytheon Co. this year on a US$90 billion takeover by United Technologies Corp. It also was BB&T Corp.’s sole adviser on its US$27.9 billion merger with SunTrust Banks Inc. and advised Broadcom Inc. on the US$10.7 billion acquisition of Symantec Corp.’s enterprise security business.

The firm was sole adviser and provided debt financing to Permira Holdings LLP for its US$2.5 billion takeover of life-sciences company Cambrex Corp., and is advising Apollo Global Management Inc and leading financing for a purchase of radio stations owned by Cox Enterprises Inc.

“In a difficult fee environment overall, we’ve made significant progress on the M&A side,” said Jim Wolfe, RBC’s other co-head of U.S. investment banking. “We’re going to be up roughly 20 per cent year-over-year in terms of U.S. advisory fees.”

This year isn’t a one-off, according to Wolfe.

Since becoming co-heads in June 2018, Wolfe and Stopnik have expanded the advisory business and leveraged-finance platform. They’re pushing to build equity capital markets and gain expertise in technology and health care. They plan to add about three senior bankers to the 40-person health care group.

“As we come into 2020 we’ve got the best pipeline that we’ve had in quite some time across all products, but particularly M&A,” Wolfe, 54, said in an interview. “We feel good about the ability to keep the momentum we achieved in 2019 as it relates to our advisory business.”

Even though there are longer-term challenges for his company, and some small businesses may not survive the pandemic, the outlook isn’t gloomy for everyone. Some experts say businesses could emerge stronger than before, and new waves of innovation could transpire.

After rolling out trillions of dollars worth of measures to prevent their economies and markets from collapsing, they are now doubling down with even more spending to backstop a recovery as coronavirus lockdowns ease.